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How to Improve Your Credit Score?

Never fall for any promises of shortcuts for building a great credit score. The fact is, there are none. The only way is by making regular payments and following the rules.

By Newsd
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How to Improve Your Credit Score?

Your credit score indicates your financial well being. A good credit score assures lenders of your responsible lending habit and motivates them to offer you instant loans at attractive interest rates. You can easily take large ticket debt instruments such as super-premium credit cards and large amounts of instant personal loans.

On the contrary, people with low credit scores have to settle for limited choices in debt offers. Also, they may have to pay higher interest rates for loans. Therefore, it is always a good idea to improve your credit score before applying for a loan. Here’s what you can do:

How to Improve Your Credit Score?

  1. Never miss an EMI and always pay off your loan dues on time. At the very basic level, a good credit score indicates you are a reliable borrower and will pay your dues in time and in full. Even missing a single EMI can negatively impact your credit score. So, always be disciplined about your EMI payments. 
  2. Never use too much of your debt eligibility. Let us take the example of a credit card—you get a limit on your card and as you spend money from it and make payments your limit keeps on getting blocked and freed up. Now, you should not use more than 30% of your borrowing potential. Utilising too much credit will hurt your credit score. 
  3. Do not look for loans regularly. While a query or two on your credit score in a quarter is something no one worries about, if there are multiple loan queries on your credit report month on month, it will start impacting your credit score. An enquiry may happen when you apply for a credit card or loan of any kind. Borrowing from a loan app may not result in the validation of your credit score, therefore, remember to check beforehand.
  4. Regularly check your credit report for any inconsistencies. Sometimes, your credit report may reflect details of bad loans taken by other people. Remember, credit scores are generated based upon information submitted by different financial institutions, leaving scope for disparities affecting your credit score. If you spot a loan or delinquency in your credit report, you can bring it to the credit bureau’s notice immediately. 
  5. Choose different types of credit to maintain a healthy credit report. Make sure you have a healthy mix of secured and unsecured debt. If you have a home loan and want some money to meet another urgent need, consider taking an instant personal loan, or if you have a balance on multiple credit card debts, take a loan from a loan app to pay off your credit card balance. 
  6. Always avail of credit limit increase offers when available, even if you are not using that debt instrument. Let us say, you take a line of credit or an OD account from a lender. After some time, they offer you to upgrade your credit limit, you should accept the offer since it will take your overall credit limit higher and reduce your credit utilisation percentage. 
  7. Ensure debts with a solid repayment track record stay on record. For example, many people close old credit cards when they get a new one with better offers. Do not do that even if you do not intend to use the old card because if you close the old card, its repayment track record will not be counted as part of your credit history and that can lower your overall credit score. 
  8. Never revolve your credit. Some people think of using a cash advance from a credit card as a way to pay off another debt commitment. This is called ‘revolving credit.’ In simple terms, this is borrowing from Peter to pay Paul. Since all banks report credit transactions to the credit bureau, their score calculating algorithms will identify credit revolving and mark it as a risky activity, thus, lowering your credit score.

 Finally, it is very important to be patient. Anyone who says that they can improve your credit score fast is either lying or trying to deceive you. Building a credit score takes months, sometimes even years, and the only way to do it is with great discipline. 

Never fall for any promises of shortcuts for building a great credit score. The fact is, there are none. The only way is by making regular payments and following the rules.

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